Tanzanian Commission Proposes ‘Super Profit’ Tax on Minerals

June 8 (Bloomberg) -- Tanzania, which vies with Mali to be
Africa’s third-biggest gold producer, may study a “super
profit” tax on minerals similar to a levy put forward in
Australia, the East African nation’s planning commission said.

“Considering the increasing trend in mineral prices, it is
optimal to introduce a super-profit tax on the windfall earnings
from the mineral sector,” the commission said in a report today
in Dodoma, the capital.

African Barrick Gold Ltd., the biggest producer of the
metal in Tanzania, fell 7.8 percent in London trading to the
lowest price since the shares started trading in March 2010.
AngloGold Ashanti Ltd., a gold miner that also operates in
the country, declined 3.1 percent in Johannesburg.

African Barrick said its mines in Tanzania are subject
to Mineral Development Agreements that guarantee tax and
“fiscal stabilization” for projects. The accords can’t be
amended without the company’s approval, it said in a statement
today. African Barrick operates four mines in the country that
account for all of its gold production.

AngloGold said its Geita mine in Tanzania won’t be
affected because an existing arrangement is valid for the life
of the mine.

Tanzania Exports

Gold exports from Tanzania have increased to $1.5 billion,
or 7 percent of gross domestic product, from $500 million over the
past five years, the commission said. At the same time, annual
government revenue from sales of the metal has remained at $100
million, or 0.5 percent of GDP, it said.

Tanzania’s main opposition Chama Cha Demokrasia na
Manedeleo plans to oppose the proposal when it's debated in
parliament next week, said Zitto Kabwe, the country’s shadow
finance minister. Instead, it will suggest changes to income-tax
laws to ensure the government raises more revenue from the
mining industry, he said in an interview today in Dodoma.

The proposal is “vague, irresponsible and sends the wrong
signal to investors,” Kabwe said. It also doesn’t appear as a
source of funding in next fiscal year’s tax measures, he said.

Australia’s planned 30 percent tax on iron ore and coal
profits will earn A$7.7 billion ($8.2 billion) in its first two
years, the country’s Treasury Department said last month. The
tax is scheduled to start in July 2012 after the laws are passed
by parliament.

Scaled Back

Australian Prime Minister Julia Gillard in July scaled back
the original proposal for a 40 percent tax on all resource
profits to a levy with a higher threshold that exempts most
commodities.

The Tanzanian levy was proposed in a five-year planning
report that targets an annual average economic growth rate of 8
percent from 2011/12 to 2015/16, the commission said. The
expansion is expected to accelerate to 10 percent by
2025, it said.

Over the next five years, Tanzania plans to increase tax
revenue as a percentage of gross domestic product to 19 percent
from 15 percent, the commission said. Annual government
spending over that period is expected to be 8.6 trillion
shillings ($5.48 billion), it said.

The government will also “continue with the process of
accessing the external sovereign debt market as a source of
infrastructure financing,” the commission said.

Tanzania’s gold output ranked behind South Africa and
Ghana, and alongside Mali’s 44.6 metric tons in 2010, according
to research company GFMS Ltd.